from the sickening dept

We noted right after the US government shut down Megaupload, that it was creating massive chilling effects on all sorts of online cloud businesses -- leading some to already turn off useful services that consumers and businesses relied on.

It appears that process is continuing. Last week, Paramount's VP of "Content Protection," Alfred Perry, made a ridiculous and childish presentation in which he effectively put criminal targets on the backs of five companies, and suggested that they were all no different than Megaupload, and that the government was coming for them next:

I find it amusing, by the way, that they've dropped RapidShare from the list. The company, which does offer the same basic services and gets a ton of traffic, has actually been one of the only cyberlockers who has hit back against Hollywood where it counts: with Washington DC lobbyists. RapidShare, of course, has also been found legal by multiple courts, because it follows the basic precepts of the DMCA and takes down infringing content when it discovers it. But the thing is, many (if not most) of the other sites on this list do the same thing.

The end result, however, is that the five sites on the list have been forced to go on the defensive hoping to avoid criminal prosecution with the federal government twisting everything they do to present it in the worst possible light.

MediaFire fired back at Perry, pointing out that the company is a large legitimate company run by reputable entrepreneurs, and one that has always worked with the MPAA and RIAA to stop the spread of infringing content. Similarly, PutLocker has fired back, telling TorrentFreak that Perry's comments were defamatory:

In any other industry, a person making this type of statement could be sued for libel. Funny how that works,” PutLocker Operations Officer Adrian Petroff told TorrentFreak.

“PutLocker takes a strong stand against copyright infringement and in the past year and a half we have taken down hundreds of thousands of infringing files and blocked the accounts of hundreds of repeat offenders,” adds Petroff. “PutLocker always cooperates with copyright holders and law enforcement agencies at home and abroad to uphold the rights of content producers and distributors alike.”

But the chilling effects here are very, very real. Two of the other five sites on the target list have now effectively made themselves useless for sharing legitimate files worldwide -- one of the key use cases for cyberlockers. FileServe and Wupload have turned themselves into pure backup services, rather than file sharing services, to avoid the risk of criminal prosecution.

Now, critics of these sites will rejoice in these two sites shutting down a useful feature. They'll insist that this proves either that they're "winning" the battle, or that these sites are somehow admitting that they were facilitating infringement. But that's a dangerous misreading of the situation. Were these sites used to infringe? Absolutely. But so was the VCR. So was radio. So were photocopying machines. So were DVRs. So were computers. The fact is that innovation leads to breaking down the old rules by enabling something new and useful.

And that's the real key here. Perry and the rest of the Hollywood legacy "content protection" crew freak out about 41 billion page views. What they ignore is that the reason there were 41 billion page views was because these sites were offering something useful that people wanted. But Perry isn't in the business of recognizing what the market wants. His very job title makes it clear that his job is holding back the tide. It's about "content protection" in a world where content can't be protected. If Paramount were run by execs who actually had vision and understood innovation, they'd see 41 billion pageviews and their eyes would light up at the massive opportunity. Just imagine what you could do with 41 billion pageviews? And, if you were a company like Paramount and could offer your content up legally, you'd have a huge head start over the cyberlockers. If anything is criminal here, it's the incredible shortsightedness of Paramount's execs, to spit in the face of consumers and a massive business opportunity for themselves.

Even worse, they're doing so by simply declaring innovative websites guilty of criminal charges, despite no actual charges being filed, no trial, no evidence and no chance for these companies to make their case. From a legal standpoint, this is despicable. It's standard operating procedures for a flailing, out of touch, anti-visionary company, however. It's just too bad that the world is letting a company like Paramount (and its parent company, Viacom) get away with such practices.

But Megaupload was not the only such service on the Web. Many companies have crowded into the online storage market recently, most of them aimed at consumers and businesses that want convenient ways to get big data files out of their teeming in-boxes, off their devices and into the cloud — perhaps so that friends or co-workers can download them. They include MediaFire, RapidShare, YouSendIt, Dropbox and Box.net. And there are similar services from Amazon, Google and Microsoft.

All of these market themselves as legitimate ways to store content online. But they are inherently ideal for anyone looking to illegitimately upload and share copyrighted video and audio files. Most companies rarely, if ever, inspect individual files to see if the material they store on behalf of users violates copyrights, unless they are notified by someone claiming infringement.

And... by Sunday, reports started spreading of other companies that provide useful services to people who want to legitimately share files... shutting down or limiting those services. For example, FileSonic -- one of the most popular cyberlockers -- has basically killed itself by no longer allowing sharing, and only allowing personal backup. Another site, Uploaded.to, then blocked all access from the US. A bunch of other services, including FileServe and VideoBB have been killing their affiliate programs (again, which had been a good way for independent musicians to make money).

RIAA supporters are cheering this on -- believing that all of these services really focused on infringing content. But for the many, many artists, companies and individuals who used them legitimately, this is pretty troubling. Useful services are being shut down due to an overreaction on the part of the US government.

Again, this is exactly the kind of collateral damage that many of us were worried about. It's entirely possible (hell, perhaps probable) that the folks behind Megaupload went beyond the confines of the law. And, if that's true, I expect that they will lose in court. But many of us are quite worried about a few things: the fact that the entire site got completely shuttered despite substantial non-infringing uses... and that it's now creating massive chilling effects for legitimate and useful services within the US. Separately, as in the case of Uploaded.to, it's also splintering the internet, by having foreign companies put blocks on US internet users. These kinds of things were exactly what people have been warning about... and yet the US government ignored all those warnings (and probably still doesn't realize what it's kicked off here).